Banks warn regulatory reform could impact growth

Deutsche Bank CEO Josef Ackermann and chairman of the board of directors of the Institute of International Finance, IIF, looks on during a news conference of the IIF ahead of their spring membership meeting in Vienna, Austria, on Thursday, June 10, 2010. (AP Photo/Ronald Zak)
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Deutsche Bank CEO Josef Ackermann and chairman of the board of directors of the Institute of International Finance, IIF, looks on during a news conference of the IIF ahead of their spring membership meeting in Vienna, Austria, on Thursday, June 10, 2010. (AP Photo/Ronald Zak)
/ AP

In Brussels, the European Banking Federation said the Basel rules would force banks to increase lending costs to eurozone households and businesses by nearly 1 percent on average.

The rules are intended to increase banks' ability to weather future storms by setting new standards - and likely higher levels - for how much capital they must set aside to counter risks. They also would hold back banks from relying heavily on short-term lending from markets.

European banks are warning these moves would impose high costs on them which they may have to pass on to customers in the form of higher interest rates. They say it could curtail lending, which already is depressed as banks become more cautious after the recent financial crisis and subsequent recession.

"Restraint imposed on banks is sufficiently severe to keep the economy in or close to recession through 2014," the banks say in the IIF report.

European companies rely far more on banks for finance than American companies which also depend selling bonds.

The banks say their analysis doesn't include the full effects of proposed bank levies - such as a yearly resolution fee to raise euro5 billion yearly that would pay the costs of unwinding troubled banks.

Some European countries also are suggesting additional bank fees to pay the costs of future bailouts.

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AP business writer Aoife White contributed to this report from Brussels.